Exciting improvements are on the horizon for the XRP Ledger (XRPL) as it prepares for the long-awaited XLS-30d modification. This upgrade is set to bring a built-in Automated Market Maker (AMM) trading mechanism to the ledger, allowing XRP token holders to earn money directly on-chain.
AMMs represent a game-changing approach to cryptocurrency trading, allowing permissionless trading through liquidity pools rather than traditional order books. Liquidity pools comprise two or more tokens contributed by users, and blockchain oracles determine the pricing of tokens within these pools.
One of the most notable advantages of AMMs is the elimination of intermediaries and order books, which results in lower transaction costs and delays. AMMs also maintain high liquidity and little slippage, allowing customers to trade with the pool regardless of market conditions.
Investors who contribute tokens to liquidity pools are rewarded with a portion of the fees earned from each trade. However, this revenue is subject to the risk of temporary loss, which occurs when market movements change the token ratio within the pool, potentially making it more beneficial for users to keep the tokens in their wallets.
The term “impermanent loss” is used because the token ratio can be restored, benefiting the token provider with fees accumulated over time. With the addition of an AMM to the XRP Ledger, XRP token holders can expect to earn fees from AMM platform trades.
Notably, an AMM on the XRP Ledger has the added benefit of allowing users to convert to other assets immediately on-chain. This action is expected to increase significantly XRP’s liquidity as liquidity providers profit from participating in liquidity pools.
It should be noted that the XLS-30d modification has not yet been triggered on the XRP Ledger, although it is expected to go live on September 11. Following its activation, validators in the network will be required to vote on the AMM’s implementation.
To summarize, the upcoming integration of an AMM trading platform on the XRP Ledger is a huge step forward for this blockchain ecosystem. Holders of XRP tokens should expect an improved trading experience, better liquidity, and the ability to earn fees while participating in the emerging decentralized financial ecosystem.
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